On the studying end: Corporate Finance!I haven't written much about what I've been studying over the last two months, but the truth is that I've had only two classes and a consulting project for the local business development organization. No, I have not just been watching soccer games and eating mussels!
For these first two months, I've had two classes in corporate finance. Before you start rolling your eyes: no! I felt the same way choosing these courses. Me, with no accounting experience, choosing finance? Was I crazy, or what?
In my school you can choose between Finance, Strategy, Marketing, and Entrepreneurship as areas of "specialization" or something akin to a major. Not that specializing in any one particular course will make you into a full-fledged expert on the subject, but by choosing to focus on a major -- which, incidentally, is NOT required (if you don't specialize, you get a degree in "general management") -- you are able to build on the previous courses that you've had in the same area and get a much better, "global" view of that particular discipline.
The first course I took was on Valuing a Corporation. Normally, when you look a balance sheet, you find assets and liabilities, which give you an idea of the official size of the company. But is this reflected by the share price? Not always, since if you multiply the number of shares by the share price, you find that this number easily outstrips the official figures of the company that you get from combining the
equity (the amount of money shareholders or owners have put into the company) and
debt (the amount of financing that the company has chosen to receive in order to fund its activities).
I hope I haven't lost too many of you with that last explanation, but the main point to take away is that a company is more often than not worth more than the numbers that it shows on the paper. Through its money-making activities it actually manages to create intangible "value" which is not reflected by the balance sheet.
The second of my finance courses, which ended yesterday, deal with securities valuation (another term which I initially shied away from but now feel much more comfortable with). Like the previous class, the first part of the course dealt with means of pricing a company and therefore the pricing of its stock (how the market assigns a value to a company), and the last two sessions dealt with bonds, options and convertible bonds (bonds which can be converted into stock). Lots of technical stuff here (at one point our young French professor started deriving many of the formulae on the blackboard, covering it with greek letters, ryo, theta, myu, and so on), but I finally realized it was more important to understand what was going on behind all the formulae. Once I did, all this scary stuff about taking the logarithm of such and such and then taking the square root and adding it to the variance of the .... seemed insignificant, since in the end (hopefully) .... in our future jobs
we will have computers (!) to do the hard work for us ...